Today's financial landscape
is changing rapidly. Just twenty years ago, the idea of money being exchanged
online was unheard of. Now convenient and cost-effective internet payments are commonplace.
Virtual currencies are
defined as peer-to-peer systems which allow their users to transfer
"value" between one another by sending funds over the global network
that connects all computers using the virtual currency software.
A virtual currency can serve
any number of purposes as in crypto news, but most commonly
facilitates transactions related to goods or services on websites that
recognize it as a valid form of payment.
How Does Cryptocurrency Work?
There are two main ways for
an online transaction to occur: on a centralized network like PayPal or Visa
(credit cards), or on a decentralized network like Bitcoin. A decentralized
network, as the name suggests, is one that shares power between its users
rather than having all control centralized in one place.
Decentralized networks are
not controlled by any individual or central entity, but instead run on
thousands of computers at once. The technology powering these networks was
first introduced by cryptographer David Chaum back in 1982 and has gone through
many iterations since then to improve security and privacy.
Cryptocurrency software
typically operates with an associated virtual currency which can be traded or
used to buy goods online. Transactions occur instantaneously within the
peer-to-peer network nearly for free, anywhere around the world, without
needing a bank account or credit card number. Additionally, all transactions
are pseudo-anonymous which makes the identity of the parties involved
untraceable.
What Are Some Advantages of Cryptocurrency?
Of course, any new technology
creates some problems. If something sounds too good to be true…well, you know
what they say. The main advantages of cryptocurrency are convenience and cost-effectiveness
for both users and merchants. It would not be an exaggeration to suggest that
cryptocurrency will eventually become the preferred method of digital payment
due to its cutting edge design and sheer simplicity.
Many people are wary about using
their financial information online given the number of data breaches over the
past few years. These attacks have revealed millions of credit card numbers,
Social Security Numbers, email addresses, passwords, etc., leaving many
consumers feeling uneasy about using their information to make purchases.
Digital currency does not require any financial information, making it an ideal
solution for people who are concerned about data theft or identity theft
online.
